Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 29, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
001-33260
(Commission File Number)
TE CONNECTIVITY LTD.
(Exact name of registrant as specified in its charter)
Switzerland(Jurisdiction of Incorporation)
98-0518048(I.R.S. Employer Identification No.)
Mühlenstrasse 26, CH-8200 Schaffhausen, Switzerland
(Address of principal executive offices)
+41 (0)52 633 66 61
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which registered
Common Shares, Par Value CHF 0.57
TEL
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of common shares outstanding as of January 19, 2024 was 308,798,987.
INDEX TO FORM 10-Q
Page
Part I.
Financial Information
Item 1.
Financial Statements
1
Condensed Consolidated Statements of Operations for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)
Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)
2
Condensed Consolidated Balance Sheets as of December 29, 2023 and September 29, 2023 (unaudited)
3
Condensed Consolidated Statements of Equity for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)
4
Condensed Consolidated Statements of Cash Flows for the Quarters Ended December 29, 2023 and December 30, 2022 (unaudited)
5
Notes to Condensed Consolidated Financial Statements (unaudited)
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
33
Item 4.
Controls and Procedures
Part II.
Other Information
Legal Proceedings
35
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Item 5.
36
Item 6.
Exhibits
Signatures
37
i
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the
Quarters Ended
December 29,
December 30,
2023
2022
(in millions, except per share data)
Net sales
$
3,831
3,841
Cost of sales
2,507
2,654
Gross margin
1,324
1,187
Selling, general, and administrative expenses
424
392
Research, development, and engineering expenses
173
Acquisition and integration costs
8
9
Restructuring and other charges, net
21
111
Operating income
698
502
Interest income
22
Interest expense
(18)
(21)
Other expense, net
(3)
(5)
Income from continuing operations before income taxes
699
485
Income tax (expense) benefit
1,105
(87)
Income from continuing operations
1,804
398
Loss from discontinued operations, net of income taxes
(1)
Net income
1,803
397
Basic earnings per share:
5.80
1.26
Loss from discontinued operations
—
1.25
Diluted earnings per share:
5.76
1.24
Weighted-average number of shares outstanding:
Basic
311
317
Diluted
313
319
See Notes to Condensed Consolidated Financial Statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
Other comprehensive income:
Currency translation
163
305
Adjustments to unrecognized pension and postretirement benefit costs, net of income taxes
Gains on cash flow hedges, net of income taxes
28
69
Other comprehensive income
376
Comprehensive income
1,976
773
Less: comprehensive income attributable to noncontrolling interests
(4)
(9)
Comprehensive income attributable to TE Connectivity Ltd.
1,972
764
CONDENSED CONSOLIDATED BALANCE SHEETS
September 29,
(in millions, except share
data)
Assets
Current assets:
Cash and cash equivalents
1,170
1,661
Accounts receivable, net of allowance for doubtful accounts of $37 and $30, respectively
2,828
2,967
Inventories
2,783
2,552
Prepaid expenses and other current assets
660
712
Total current assets
7,441
7,892
Property, plant, and equipment, net
3,854
3,754
Goodwill
5,836
5,463
Intangible assets, net
1,278
1,175
Deferred income taxes
3,852
2,600
Other assets
810
828
Total assets
23,071
21,712
Liabilities, redeemable noncontrolling interests, and equity
Current liabilities:
Short-term debt
613
682
Accounts payable
1,690
1,563
Accrued and other current liabilities
1,708
2,218
Total current liabilities
4,011
4,463
Long-term debt
3,585
3,529
Long-term pension and postretirement liabilities
744
728
188
185
Income taxes
380
365
Other liabilities
914
787
Total liabilities
9,822
10,057
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests
108
104
Equity:
TE Connectivity Ltd. shareholders' equity:
Common shares, CHF 0.57 par value, 322,470,281 shares authorized and issued
142
Accumulated earnings
14,678
12,947
Treasury shares, at cost, 13,050,787 and 10,487,742 shares, respectively
(1,695)
(1,380)
Accumulated other comprehensive income (loss)
11
(158)
Total TE Connectivity Ltd. shareholders' equity
13,136
11,551
Noncontrolling interests
Total equity
13,141
Total liabilities, redeemable noncontrolling interests, and equity
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Quarter Ended December 29, 2023
Accumulated
TE Connectivity
Other
Ltd.
Non-
Common Shares
Treasury Shares
Contributed
Comprehensive
Shareholders'
controlling
Total
Shares
Amount
Surplus
Earnings
Income (Loss)
Equity
Interests
Balance at September 29, 2023
322
(10)
Acquisition
169
Share-based compensation expense
34
Exercise of share options
Restricted share award vestings and other activity
94
(34)
(72)
(12)
Repurchase of common shares
(420)
Balance at December 29, 2023
(13)
For the Quarter Ended December 30, 2022
Loss
Balance at September 30, 2022
331
146
(1,681)
12,832
(495)
10,802
367
32
49
(32)
(29)
(2)
(233)
Balance at December 30, 2022
(14)
(1,854)
13,200
(128)
11,364
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Adjustments to reconcile income from continuing operations to net cash provided by operating activities:
Depreciation and amortization
194
187
(1,217)
(35)
Non-cash lease cost
Provision for losses on accounts receivable and inventories
42
51
40
Changes in assets and liabilities, net of the effects of acquisitions and divestitures:
Accounts receivable, net
127
(54)
(282)
(324)
(48)
(86)
128
149
(239)
(39)
12
25
90
Net cash provided by operating activities
719
581
Cash flows from investing activities:
Capital expenditures
(151)
(183)
Proceeds from sale of property, plant, and equipment
Acquisition of businesses, net of cash acquired
(349)
(109)
Proceeds from divestiture of business, net of cash retained by business sold
38
(8)
26
Net cash used in investing activities
(468)
(265)
Cash flows from financing activities:
Net decrease in commercial paper
(69)
(139)
Repayment of debt
Proceeds from exercise of share options
(476)
(287)
Payment of common share dividends to shareholders
(178)
(27)
(24)
Net cash used in financing activities
(745)
(621)
Effect of currency translation on cash
10
Net decrease in cash, cash equivalents, and restricted cash
(491)
(295)
Cash, cash equivalents, and restricted cash at beginning of period
1,088
Cash, cash equivalents, and restricted cash at end of period
793
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation and Accounting Policies
The unaudited Condensed Consolidated Financial Statements of TE Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and the instructions to Form 10-Q under the Securities Exchange Act of 1934. In management’s opinion, the unaudited Condensed Consolidated Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire fiscal year or any subsequent interim period.
The year-end balance sheet data was derived from audited financial statements, but does not include all of the information and disclosures required by GAAP. These financial statements should be read in conjunction with our audited Consolidated Financial Statements contained in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023.
Unless otherwise indicated, references in the Condensed Consolidated Financial Statements to fiscal 2024 and fiscal 2023 are to our fiscal years ending September 27, 2024 and ended September 29, 2023, respectively.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for our fiscal 2025 Annual Report and subsequent interim periods; however, early adoption is permitted. The amendments should be applied retrospectively to all periods presented in the financial statements. We are currently assessing the impact that adoption will have on our Condensed Consolidated Financial Statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvement to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures through improvements to disclosures related primarily to the rate reconciliation and income taxes paid information. The amendments are effective for us in fiscal 2026; however, early adoption is permitted. We are currently assessing the impact that adoption will have on our Condensed Consolidated Financial Statements.
Recently Adopted Accounting Pronouncement
In September 2022, the FASB issued ASU No. 2022-04, Liabilities—Supplier Finance Programs (Subtopic 405-50)—Disclosure of Supplier Finance Program Obligations, to enhance transparency and introduce new disclosures related to an entity’s use of supplier finance programs in connection with the purchase of goods and services. The ASU requires us, as a buyer in a supplier finance program, to disclose the key terms of the program, the amount of obligations outstanding, the balance sheet presentation of such amounts, and a rollforward of the obligation activity during the annual period. We adopted this update in the first quarter of fiscal 2024. Adoption did not have a material impact on our Condensed Consolidated Financial Statements. See Note 9 for additional information regarding our supply chain finance program.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)(Continued)
2. Restructuring and Other Charges, Net
Net restructuring and other charges consisted of the following:
Restructuring charges, net
Loss on divestiture and impairment of held for sale business
Other charges, net
Restructuring Charges, Net
Net restructuring and charges by segment were as follows:
Transportation Solutions
74
Industrial Solutions
Communications Solutions
24
Activity in our restructuring reserves was as follows:
Balance at
Changes in
Cash
Non-Cash
Currency
Charges
Estimate
Payments
Items
Translation
Fiscal 2024 Actions:
Employee severance
Fiscal 2023 Actions:
(20)
167
Facility and other exit costs
Property, plant, and equipment
189
(23)
Pre-Fiscal 2023 Actions:
113
131
(25)
117
Total Activity
320
289
7
Fiscal 2024 Actions
During fiscal 2024, we initiated a restructuring program to optimize our manufacturing footprint and improve the cost structure of the organization, primarily in the Industrial Solutions and Transportation Solutions segments. During the quarter ended December 29, 2023, we recorded restructuring charges of $5 million in connection with this program. We expect to complete all restructuring actions commenced during the quarter ended December 29, 2023 by the end of fiscal 2025, and we expect additional charges related to actions commenced during the quarter ended December 29, 2023 will be insignificant.
Fiscal 2023 Actions
During fiscal 2023, we initiated a restructuring program associated with cost structure improvements across all segments. In connection with this program, during the quarters ended December 29, 2023 and December 30, 2022, we recorded net restructuring credits of $3 million and charges of $105 million, respectively. We expect to complete all restructuring actions commenced during fiscal 2023 by the end of fiscal 2025, and to incur additional charges of approximately $24 million related primarily to employee severance and facility exit costs.
The following table summarizes expected, incurred, and remaining charges for the fiscal 2023 program by segment as of December 29, 2023:
Cumulative
Remaining
Expected
Incurred
153
138
15
80
73
268
244
Pre-Fiscal 2023 Actions
During the quarters ended December 29, 2023 and December 30, 2022, we recorded net restructuring charges of $7 million and credits of $1 million, respectively, related to pre-fiscal 2023 actions. We expect that any additional charges related to restructuring actions commenced prior to fiscal 2023 will be insignificant.
Total Restructuring Reserves
Restructuring reserves included on the Condensed Consolidated Balance Sheets were as follows:
204
240
85
Restructuring reserves
Divestiture
During the quarter ended December 29, 2023, we sold one business for net cash proceeds of $38 million. In connection with the divestiture, we recorded a pre-tax loss on sale of $11 million. The business sold was reported in our Transportation Solutions segment.
3. Acquisitions
During the quarter ended December 29, 2023, we acquired approximately 98.7% of the outstanding shares of Schaffner Holding AG (“Schaffner”), a leader in electromagnetic solutions based in Switzerland, for CHF 505.00 per share in cash for a purchase price of CHF 302 million (equivalent to $349 million), net of cash acquired. As a result of the transaction, we recognized a noncontrolling interest with a fair value of $5 million as of the acquisition date. Due to the timing of the transaction, which was reported as part of our Industrial Solutions segment, we preliminarily allocated the purchase price to goodwill and identifiable intangible assets. Our valuation of identifiable intangible assets, assets acquired, and liabilities assumed is currently in process; therefore, the current allocation is subject to adjustment upon finalization of the valuations. The amount of these potential adjustments could be significant. We intend to initiate a squeeze-out procedure and delist the remaining Schaffner shares from SIX Swiss Exchange during fiscal 2024.
We acquired one business for a cash purchase price of $109 million, net of cash acquired, during the quarter ended December 30, 2022. The acquisition was reported as part of our Industrial Solutions segment from the date of acquisition.
4. Inventories
Inventories consisted of the following:
Raw materials
394
Work in progress
1,284
1,185
Finished goods
1,000
5. Goodwill
The changes in the carrying amount of goodwill by segment were as follows:
Transportation
Industrial
Communications
Solutions
September 29, 2023(1)
1,478
3,263
722
257
Currency translation and other
29
71
16
116
December 29, 2023(1)
1,507
3,591
738
During the quarter ended December 29, 2023, we recognized goodwill in the Industrial Solutions segment in connection with an acquisition. See Note 3 for additional information regarding acquisitions.
6. Intangible Assets, Net
Intangible assets consisted of the following:
December 29, 2023
September 29, 2023
Gross
Net
Carrying
Amortization
Customer relationships
1,876
(856)
1,020
1,720
(806)
Intellectual property
1,129
(884)
245
1,186
(938)
248
(6)
13
3,024
(1,746)
2,925
(1,750)
Intangible asset amortization expense was $42 million and $46 million for the quarters ended December 29, 2023 and December 30, 2022, respectively.
At December 29, 2023, the aggregate amortization expense on intangible assets is expected to be as follows:
Remainder of fiscal 2024
Fiscal 2025
161
Fiscal 2026
154
Fiscal 2027
135
Fiscal 2028
102
Fiscal 2029
95
Thereafter
503
7. Debt
As of December 29, 2023, Tyco Electronics Group S.A. (“TEGSA”), our wholly-owned subsidiary, had $261 million of commercial paper outstanding at a weighted-average interest rate of 5.50%. TEGSA had $330 million of commercial paper outstanding at a weighted-average interest rate of 5.50% at September 29, 2023.
The fair value of our debt, based on indicative valuations, was approximately $4,103 million and $3,974 million at December 29, 2023 and September 29, 2023, respectively.
8. Leases
The components of lease cost were as follows:
Operating lease cost
Variable lease cost
Total lease cost
46
Cash flow information, including significant non-cash transactions, related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Payments for operating leases(1)
Right-of-use assets, including modifications of existing leases, obtained in exchange for operating lease liabilities
70
9. Commitments and Contingencies
In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.
Trade Compliance Matters
We have been investigating our past compliance with relevant U.S. trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S. Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S. State Department’s Directorate of Defense Trade Controls (“DDTC”). We are cooperating with the BIS and DDTC on these matters, and the resulting investigations are ongoing. We have also been contacted by the U.S. Department of Justice concerning aspects of these matters. We are unable to predict the timing and final outcome of the agencies’ investigations. An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties. Although we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.
Environmental Matters
We are involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. The ultimate cost of site cleanup is difficult to predict given the uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods. As of December 29, 2023, we concluded that we would incur investigation and remediation costs at these sites in the reasonably possible range of $17 million to $44 million, and we accrued $20 million as the probable loss, which was the best estimate within this range. We believe that any potential payment of such estimated amounts will not have a material adverse effect on our results of operations, financial position, or cash flows.
Guarantees
In disposing of assets or businesses, we often provide representations, warranties, and/or indemnities to cover various risks including unknown damage to assets, environmental risks involved in the sale of real estate, liability for investigation and remediation of environmental contamination at waste disposal sites and manufacturing facilities, and unidentified tax liabilities and legal fees related to periods prior to disposition. We do not expect that these uncertainties will have a material adverse effect on our results of operations, financial position, or cash flows.
At December 29, 2023, we had outstanding letters of credit, letters of guarantee, and surety bonds of $196 million, including letters of credit of $22 million associated with our divestiture of the Subsea Communications business. In addition, as of December 29, 2023, we had $26 million of performance guarantees associated with the divestiture. We contractually agreed to continue to honor letters of credit and performance guarantees related to the business’ projects that existed as of the date of sale; however, based on historical experience, we do not anticipate having to perform on these guarantees.
Supply Chain Finance Program
We have an agreement with a financial institution that allows participating suppliers the ability to finance payment obligations. The financial institution has separate arrangements with the suppliers and provides them with the option to request early payment for invoices. We do not determine the terms or conditions of the arrangement between the financial institution and suppliers. Our obligation to suppliers, including amounts due and scheduled payment dates, are not impacted by the suppliers’ decisions to finance amounts under the arrangement and we are not required to post collateral with the financial institution. The outstanding payment obligations under our supply chain finance program, which are included in accounts payable on our Condensed Consolidated Balance Sheets, were $122 million and $109 million at December 29, 2023 and September 29, 2023, respectively.
10. Financial Instruments
Foreign Currency Exchange Rate Risk
As part of managing the exposure to changes in foreign currency exchange rates, we utilize cross-currency swap contracts and foreign currency forward contracts, a portion of which are designated as cash flow hedges. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in foreign currency exchange rates on intercompany and other cash transactions. We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with the cash flow hedge-designated instruments addressing foreign exchange risks will be reclassified into the Condensed Consolidated Statement of Operations within the next twelve months.
Hedge of Net Investment
We hedge our net investment in certain foreign operations using intercompany loans and external borrowings denominated in the same currencies. The aggregate notional value of these hedges was $2,792 million and $1,709 million at December 29, 2023 and September 29, 2023, respectively.
We also use a cross-currency swap program to hedge our net investment in certain foreign operations. The aggregate notional value of the contracts under this program was $3,599 million and $3,806 million at December 29, 2023 and September 29, 2023, respectively. Under the terms of these contracts, we receive interest in U.S. dollars at a weighted-average rate of 1.6% per annum and pay no interest. Upon the maturity of these contracts at various dates through fiscal 2028, we will pay the notional value of the contracts in the designated foreign currency and receive U.S. dollars from our counterparties. We are not required to provide collateral for these contracts.
These cross-currency swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:
60
109
79
59
The impacts of our hedge of net investment programs were as follows:
Foreign currency exchange losses on intercompany loans and external borrowings(1)
(107)
(165)
Losses on cross-currency swap contracts designated as hedges of net investment(1)
(125)
(137)
Commodity Hedges
As part of managing the exposure to certain commodity price fluctuations, we utilize commodity swap contracts. The objective of these contracts is to minimize impacts to cash flows and profitability due to changes in prices of commodities used in production. These contracts had an aggregate notional value of $431 million and $459 million at December 29, 2023 and September 29, 2023, respectively, and were designated as cash flow hedges. These commodity swap contracts were recorded on the Condensed Consolidated Balance Sheets as follows:
The impacts of our commodity swap contracts were as follows:
Gains recorded in other comprehensive income (loss)
47
Losses reclassified from accumulated other comprehensive income (loss) into cost of sales
We expect that significantly all of the balance in accumulated other comprehensive income (loss) associated with commodity hedges will be reclassified into the Condensed Consolidated Statement of Operations within the next twelve months.
11. Retirement Plans
The net periodic pension benefit cost for all non-U.S. and U.S. defined benefit pension plans was as follows:
Non-U.S. Plans
U.S. Plans
Operating expense:
Service cost
Other (income) expense:
Interest cost
14
Expected returns on plan assets
(11)
Amortization of net actuarial loss
Amortization of prior service credit
Net periodic pension benefit cost
During the quarter ended December 29, 2023, we contributed $12 million to our non-U.S. pension plans.
12. Income Taxes
We recorded an income tax benefit of $1,105 million and expense of $87 million for the quarters ended December 29, 2023 and December 30, 2022, respectively. The income tax benefit for the quarter ended December 29, 2023 included an $874 million net income tax benefit associated with a ten-year tax credit obtained by a Swiss subsidiary and a $262 million income tax benefit related to the revaluation of deferred tax assets as a result of a corporate tax rate increase in Switzerland. In addition, the income tax benefit for the quarter ended December 29, 2023 included a $118 million income tax benefit associated with the tax impacts of a legal entity restructuring with related costs of $4 million recorded in selling, general, and administrative expenses for other non-income taxes.
Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that, as of December 29, 2023, approximately $30 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.
We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Condensed Consolidated Balance Sheet as of December 29, 2023.
13. Earnings Per Share
The weighted-average number of shares outstanding used in the computations of basic and diluted earnings per share were as follows:
Dilutive impact of share-based compensation arrangements
The following share options were not included in the computation of diluted earnings per share because the instruments’ underlying exercise prices were greater than the average market prices of our common shares and inclusion would be antidilutive:
Antidilutive share options
14. Equity
Dividends
We paid cash dividends to shareholders as follows:
Dividends paid per common share
0.59
0.56
Upon shareholders’ approval of a dividend payment, we record a liability with a corresponding charge to equity. At December 29, 2023 and September 29, 2023, the unpaid portion of the dividends recorded in accrued and other current liabilities on the Condensed Consolidated Balance Sheets totaled $183 million and $368 million, respectively.
Share Repurchase Program
During the quarter ended December 29, 2023, our board of directors authorized an increase of $1.5 billion in our share repurchase program. Common shares repurchased under the share repurchase program were as follows:
Number of common shares repurchased
Repurchase value
420
233
At December 29, 2023, we had $1.8 billion of availability remaining under our share repurchase authorization.
15. Share Plans
Share-based compensation expense, which was included in selling, general, and administrative expenses on the Condensed Consolidated Statements of Operations, was as follows:
As of December 29, 2023, there was $211 million of unrecognized compensation expense related to share-based awards, which is expected to be recognized over a weighted-average period of 1.9 years.
During the quarter ended December 29, 2023, we granted the following share-based awards as part of our annual incentive plan grant:
Grant-Date
Fair Value
Share options
0.9
39.77
Restricted share awards
0.4
131.77
Performance share awards
0.2
As of December 29, 2023, we had six million shares available for issuance under the TE Connectivity Ltd. 2007 Stock and Incentive Plan, amended and restated as of December 12, 2023.
Share-Based Compensation Assumptions
The assumptions we used in the Black-Scholes-Merton option pricing model for the options granted as part of our annual incentive plan grant were as follows:
Expected share price volatility
31
%
Risk-free interest rate
4.6
Expected annual dividend per share
2.36
Expected life of options (in years)
5.3
16. Segment and Geographic Data
Net sales by segment(1) and industry end market(2) were as follows:
Transportation Solutions:
Automotive
1,776
1,649
Commercial transportation
356
348
Sensors
241
262
Total Transportation Solutions
2,373
2,259
Industrial Solutions:
Industrial equipment
330
434
Aerospace, defense, and marine
290
264
Energy
205
Medical
200
Total Industrial Solutions
1,025
1,060
Communications Solutions:
Data and devices
279
329
Appliances
193
Total Communications Solutions
433
522
17
Net sales by geographic region(1) and segment were as follows:
Europe/Middle East/Africa (“EMEA”):
867
812
477
444
67
Total EMEA
1,411
1,326
Asia–Pacific:
1,012
924
147
220
294
Total Asia–Pacific
1,379
1,407
Americas:
494
523
401
427
158
Total Americas
1,041
1,108
Operating income by segment was as follows:
478
282
141
156
64
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements as a result of many factors, including but not limited to those under the heading “Forward-Looking Information” and “Part II. Item 1A. Risk Factors.”
Our Condensed Consolidated Financial Statements have been prepared in United States (“U.S.”) dollars, in accordance with accounting principles generally accepted in the U.S. (“GAAP”).
The following discussion includes organic net sales growth (decline) which is a non-GAAP financial measure. See “Non-GAAP Financial Measure” for additional information regarding this measure.
Overview
TE Connectivity Ltd. (“TE Connectivity” or the “Company,” which may be referred to as “we,” “us,” or “our”) is a global industrial technology leader creating a safer, sustainable, productive, and connected future. Our broad range of connectivity and sensor solutions enable the distribution of power, signal, and data to advance next-generation transportation, renewable energy, automated factories, data centers, medical technology, and more.
Summary of Performance
Economic Conditions
Our business and operating results have been and will continue to be affected by worldwide economic conditions. The global economy has been impacted in recent years by supply chain disruptions and inflationary cost pressures as well as military conflict in certain parts of the world and the COVID-19 pandemic. We are monitoring the current environment and its potential effects on our customers and the end markets we serve.
In recent years, we have experienced inflationary cost pressures including increased costs for transportation, energy, and raw materials. However, we have been able to mitigate increased costs and supply chain disruptions through productivity or price increases which were initiated in prior years. Also, we have taken and continue to focus on actions to manage costs, including restructuring and other cost reduction initiatives such as reducing discretionary spending and travel. Additionally, we are managing our capital resources and monitoring capital availability to ensure that we have sufficient resources to fund our future capital needs. See further discussion in “Liquidity and Capital Resources.”
We continue to monitor military conflict in certain parts of the world as well as escalating tensions in surrounding countries and associated sanctions. These did not have a significant impact on our business, financial condition, or results of operations during fiscal 2023 or the first quarter of fiscal 2024.
The COVID-19 pandemic had a global impact and resulted in business slowdowns or shutdowns, including systemic disruptions of global supply chains. The pandemic impacted certain aspects of our business, including certain of our operations in China in early fiscal 2023; however, we do not expect the pandemic to have a significant impact on our businesses globally in fiscal 2024.
Outlook
In the second quarter of fiscal 2024, we expect our net sales to be approximately $3.95 billion as compared to $4.16 billion in the second quarter of fiscal 2023, with sales declines in all segments. As compared to the first quarter of fiscal 2024, we expect net sales in the second quarter of fiscal 2024 to increase with sales growth in the Industrial Solutions segment partially offset by a slight decline in the Transportation Solutions segment. We expect diluted earnings per share from continuing operations to be approximately $1.75 per share in the second quarter of fiscal 2024. This outlook reflects the negative impact of foreign currency exchange rates on net sales and earnings per share of approximately $13 million and $0.05 per share, respectively, in the second quarter of fiscal 2024 as compared to the same period of fiscal 2023. Also, this outlook is based on foreign currency exchange rates and commodity prices that are consistent with current levels.
During the first quarter of fiscal 2024, we acquired approximately 98.7% of the outstanding shares of Schaffner Holding AG (“Schaffner”), a leader in electromagnetic solutions based in Switzerland, for CHF 505.00 per share in cash for a purchase price of CHF 302 million (equivalent to $349 million), net of cash acquired. The Schaffner business has been reported as part of our Industrial Solutions segment from the date of acquisition. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.
During the first quarter of fiscal 2024, we sold one business for net cash proceeds of $38 million. In connection with the divestiture, we recorded a pre-tax loss on sale of $11 million. The business sold was reported in our Transportation Solutions segment. See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding divestitures.
20
Results of Operations
Net Sales
The following table presents our net sales and the percentage of total net sales by segment:
($ in millions)
62
58
27
100
The following table provides an analysis of the change in our net sales by segment:
Change in Net Sales for the Quarter Ended December 29, 2023
versus Net Sales for the Quarter Ended December 30, 2022
Organic Net Sales
Growth (Decline)
(Divestitures)
114
5.0
(3.3)
(52)
(4.9)
(89)
(17.0)
(0.3)
(28)
(0.7)
44
(26)
Net sales slightly decreased by $10 million, or 0.3%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. The decrease in net sales resulted from organic net sales declines of 0.7% and the net negative impact of 0.7% from an acquisition and divestitures, largely offset by the positive impact of foreign currency translation of 1.1% due to the strengthening of certain foreign currencies. Pricing actions initiated during fiscal 2023 positively affected organic net sales by $68 million in the first quarter of fiscal 2024.
See further discussion of net sales below under “Segment Results.”
Net Sales by Geographic Region. Our business operates in three geographic regions—Europe/Middle East/Africa (“EMEA”), Asia–Pacific, and the Americas—and our results of operations are influenced by changes in foreign currency exchange rates. Increases or decreases in the value of the U.S. dollar, compared to other currencies, will directly affect our reported results as we translate those currencies into U.S. dollars at the end of each fiscal period.
Approximately 60% of our net sales were invoiced in currencies other than the U.S. dollar in the first quarter of fiscal 2024.
The following table presents our net sales and the percentage of total net sales by geographic region(1):
EMEA
Asia–Pacific
Americas
The following table provides an analysis of the change in our net sales by geographic region:
6.4
2.5
(2.0)
(0.4)
(67)
(6.0)
(55)
(5.0)
Cost of Sales and Gross Margin
The following table presents cost of sales and gross margin information:
Change
(147)
As a percentage of net sales
65.4
69.1
137
34.6
30.9
Gross margin increased $137 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 primarily as a result of improved manufacturing productivity and the positive impact of prior year pricing actions, partially offset by lower volume.
We use a wide variety of raw materials in the manufacture of our products, and cost of sales and gross margin are subject to variability in raw material prices. In recent years, raw material prices and availability have been affected by worldwide economic conditions, including supply chain disruptions and inflationary cost pressures. The following table presents the average prices incurred related to copper, gold, silver, and palladium:
Measure
Copper
Lb.
3.87
4.18
Gold
Troy oz.
1,943
1,821
Silver
23.15
24.26
Palladium
1,500
2,083
We expect to purchase approximately 185 million pounds of copper, 110,000 troy ounces of gold, 2.0 million troy ounces of silver, and 10,000 troy ounces of palladium in fiscal 2024.
Operating Expenses
The following table presents operating expense information:
11.1
10.2
(90)
Selling, General, and Administrative Expenses. Selling, general, and administrative expenses increased $32 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due primarily to the impact of inflation, partially offset by savings attributable to prior restructuring actions.
Restructuring and Other Charges, Net. We are committed to continuous productivity improvements, and we evaluate opportunities to simplify our global manufacturing footprint, migrate facilities to lower-cost regions, reduce fixed costs, and eliminate excess capacity. These initiatives are designed to help us maintain our competitiveness in the industry, improve our operating leverage, and position us for future growth.
During fiscal 2024, we initiated a restructuring program to optimize our manufacturing footprint and improve the cost structure of the organization, primarily in the Industrial Solutions and Transportation Solutions segments. We incurred net restructuring charges of $9 million during the first quarter of fiscal 2024. Annualized cost savings related to the fiscal 2024 actions commenced during the first quarter of fiscal 2024 are expected to be approximately $3 million and are expected to be fully realized by the end of fiscal 2025. Cost savings will be reflected primarily in cost of sales and selling, general, and administrative expenses. For fiscal 2024, we expect total restructuring charges to be approximately $100 million and total spending, which will be funded with cash from operations, to be approximately $175 million.
See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding net restructuring and other charges.
Operating Income
The following table presents operating income and operating margin information:
196
Operating margin
18.2
13.1
23
Operating income included the following:
Taxes (non-income tax) recorded in selling, general, and administrative expenses
120
See discussion of operating income below under “Segment Results.”
Non-Operating Items
The following table presents select non-operating information:
Income tax expense (benefit)
(1,105)
87
(1,192)
Effective tax rate
(158.1)
17.9
Income Taxes. See Note 12 to the Condensed Consolidated Financial Statements for discussion of income taxes.
The Organisation for Economic Co-operation and Development (“OECD”) and participating countries continue to work toward the enactment of a 15% global minimum corporate tax. Member states have begun to enact the rules, with some countries accelerating the impact of these rules by proposing immediate statutory rate increases. In 2023, Swiss Parliament approved a constitutional amendment to implement the rules and the Swiss Federal Council acted in December to implement elements of the OECD’s global minimum tax rules, effective as of January 1, 2024. The global minimum tax is a significant structural change to the international taxation framework, which is expected to affect us beginning in fiscal 2025. Although global enactment has begun, the OECD and participating countries continue to work on defining the underlying rules and administrative procedures. We are currently monitoring these developments and evaluating the impact, which could be material to our results of operations, cash taxes, and worldwide corporate effective tax rate.
Segment Results
Net Sales. The following table presents the Transportation Solutions segment’s net sales and the percentage of total net sales by industry end market(1):
75
The following table provides an analysis of the change in the Transportation Solutions segment’s net sales by industry end market:
7.7
8.1
2.3
0.7
(8.0)
(9.2)
Net sales in the Transportation Solutions segment increased $114 million, or 5.0%, in the first quarter of fiscal 2024 from the first quarter of fiscal 2023 due primarily to organic net sales growth of 5.0%. Our organic net sales by industry end market were as follows:
Operating Income. The following table presents the Transportation Solutions segment’s operating income and operating margin information:
20.1
12.5
Operating income in the Transportation Solutions segment increased $196 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. Excluding the items below, operating income increased in the first quarter of fiscal 2024 primarily as a result of improved manufacturing productivity and the positive impact of prior year pricing actions.
76
Net Sales. The following table presents the Industrial Solutions segment’s net sales and the percentage of total net sales by industry end market(1):
41
The following table provides an analysis of the change in the Industrial Solutions segment’s net sales by industry end market:
(Divestiture)
(104)
(24.0)
(115)
(26.3)
9.8
8.5
1.4
15.6
In the Industrial Solutions segment, net sales decreased $35 million, or 3.3%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due primarily to organic net sales declines of 4.9%. Pricing actions initiated in fiscal 2023 positively affected organic net sales by $50 million in the first quarter of fiscal 2024. Our organic net sales by industry end market were as follows:
Operating Income. The following table presents the Industrial Solutions segment’s operating income and operating margin information:
(15)
13.8
14.7
Operating income in the Industrial Solutions segment decreased $15 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. Excluding the items below, operating income decreased during the first quarter of fiscal 2024 primarily as a result of lower volume, partially offset by the positive impact of prior year pricing actions.
Net Sales. The following table presents the Communications Solutions segment’s net sales and the percentage of total net sales by industry end market(1):
63
The following table provides an analysis of the change in the Communications Solutions segment’s net sales by industry end market:
Decline
(50)
(15.2)
(20.2)
Net sales in the Communications Solutions segment decreased $89 million, or 17.0%, in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023 due to organic net sales declines of 17.0%. Our organic net sales by industry end market were as follows:
Operating Income. The following table presents the Communications Solutions segment’s operating income and operating margin information:
12.3
Operating income in the Communications Solutions segment increased $15 million in the first quarter of fiscal 2024 as compared to the first quarter of fiscal 2023. Excluding the items below, operating income decreased slightly due primarily to lower volume, largely offset by improved manufacturing productivity.
Liquidity and Capital Resources
Our ability to fund our future capital needs will be affected by our ongoing ability to generate cash from operations and may be affected by our access to capital markets, money markets, or other sources of funding, as well as the capacity and terms of our financing arrangements. We believe that cash generated from operations and, to the extent necessary, these other sources of potential funding will be sufficient to meet our anticipated capital needs for the foreseeable future, including the payment of $350 million of 3.45% senior notes due in August 2024. We may use excess cash to purchase a portion of our common shares pursuant to our authorized share repurchase program, to acquire strategic businesses or product lines, to pay dividends on our common shares, or to reduce our outstanding debt. The cost or availability of future funding may be impacted by financial market conditions. We will continue to monitor financial markets and respond as necessary to changing conditions. We believe that we have sufficient financial resources and liquidity which will enable us to meet our ongoing working capital and other cash flow needs.
Cash Flows from Operating Activities
In the first quarter of fiscal 2024, net cash provided by operating activities increased $138 million to $719 million from $581 million in the first quarter of fiscal 2023. The increase resulted primarily from higher pre-tax income, partially offset by the impact of changes in working capital levels. The amount of income taxes paid, net of refunds, during the first quarters of fiscal 2024 and 2023 was $100 million and $98 million, respectively.
Cash Flows from Investing Activities
Capital expenditures were $151 million and $183 million in the first quarters of fiscal 2024 and 2023, respectively. We expect fiscal 2024 capital spending levels to be approximately 5% of net sales. We believe our capital funding levels are adequate to support new programs, and we continue to invest in our manufacturing infrastructure to further enhance productivity and manufacturing capabilities.
During the first quarter of fiscal 2024, we received net cash proceeds of $38 million related to the sale of one business. See Note 2 to the Condensed Consolidated Financial Statements for additional information.
During the first quarter of fiscal 2024, we acquired one business for a cash purchase price of $349 million, net of cash acquired. We acquired one business for a cash purchase price of $109 million, net of cash acquired, during the first quarter of fiscal 2023. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding acquisitions.
Cash Flows from Financing Activities and Capitalization
Total debt at December 29, 2023 and September 29, 2023 was $4,198 million and $4,211 million, respectively. See Note 7 to the Condensed Consolidated Financial Statements for additional information regarding debt.
TEGSA has a five-year unsecured senior revolving credit facility (“Credit Facility”) with a maturity date of June 2026 and total commitments of $1.5 billion. TEGSA had no borrowings under the Credit Facility at December 29, 2023 or September 29, 2023.
The Credit Facility contains a financial ratio covenant providing that if, as of the last day of each fiscal quarter, our ratio of Consolidated Total Debt to Consolidated EBITDA (as defined in the Credit Facility) for the then most recently concluded period of four consecutive fiscal quarters exceeds 3.75 to 1.0, an Event of Default (as defined in the Credit Facility) is triggered. The Credit Facility and our other debt agreements contain other customary covenants. None of our covenants are presently considered restrictive to our operations. As of December 29, 2023, we were in compliance with all of our debt covenants and believe that we will continue to be in compliance with our existing covenants for the foreseeable future.
In addition to the Credit Facility, TEGSA is the borrower under our senior notes and commercial paper. TEGSA’s payment obligations under its senior notes, commercial paper, and Credit Facility are fully and unconditionally guaranteed on an unsecured basis by its parent, TE Connectivity Ltd.
Payments of common share dividends to shareholders were $183 million and $178 million in the first quarters of fiscal 2024 and 2023, respectively.
During the first quarter of fiscal 2024, our board of directors authorized an increase of $1.5 billion in our share repurchase program. We repurchased approximately three million of our common shares for $420 million and approximately two million of our common shares for $233 million under the share repurchase program during the first quarters of fiscal 2024 and 2023, respectively. At December 29, 2023, we had $1.8 billion of availability remaining under our share repurchase authorization.
Summarized Guarantor Financial Information
As discussed above, our senior notes, commercial paper, and Credit Facility are issued by TEGSA and are fully and unconditionally guaranteed on an unsecured basis by TEGSA’s parent, TE Connectivity Ltd. In addition to being the issuer of our debt securities, TEGSA owns, directly or indirectly, all of our operating subsidiaries. The following tables present
summarized financial information, excluding investments in and equity in earnings of our non-guarantor subsidiaries, for TE Connectivity Ltd. and TEGSA on a combined basis.
Balance Sheet Data:
1,117
1,632
Total noncurrent assets(1)
3,485
2,857
940
1,303
Total noncurrent liabilities(2)
8,710
7,592
Quarter Ended
Fiscal Year Ended
Statement of Operations Data:
Loss from continuing operations
(153)
(606)
Net loss
In certain instances, we have guaranteed the performance of third parties and provided financial guarantees for uncompleted work and financial commitments. The terms of these guarantees vary with end dates ranging from fiscal 2024 through the completion of such transactions. The guarantees would be triggered in the event of nonperformance, and the potential exposure for nonperformance under the guarantees would not have a material effect on our results of operations, financial position, or cash flows.
Commitments and Contingencies
In the normal course of business, we are subject to various legal proceedings and claims, including patent infringement claims, product liability matters, employment disputes, disputes on agreements, other commercial disputes, environmental matters, antitrust claims, and tax matters, including non-income tax matters such as value added tax, sales and use tax, real estate tax, and transfer tax. Although it is not feasible to predict the outcome of these proceedings, based upon
30
our experience, current information, and applicable law, we do not expect that the outcome of these proceedings, either individually or in the aggregate, will have a material effect on our results of operations, financial position, or cash flows.
Critical Accounting Policies and Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses.
Our accounting policies for revenue recognition, goodwill and other intangible assets, income taxes, and pension plans are based on, among other things, judgments and assumptions made by management. For additional information regarding these policies and the underlying accounting assumptions and estimates used in these policies, refer to “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and the Consolidated Financial Statements and accompanying notes contained in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023. There were no significant changes to this information during the first quarter of fiscal 2024.
Accounting Pronouncements
See Note 1 to the Condensed Consolidated Financial Statements for additional information regarding recently issued and adopted accounting pronouncements.
Non-GAAP Financial Measure
Organic Net Sales Growth (Decline)
We present organic net sales growth (decline) as we believe it is appropriate for investors to consider this adjusted financial measure in addition to results in accordance with GAAP. Organic net sales growth (decline) represents net sales growth (decline) (the most comparable GAAP financial measure) excluding the impact of foreign currency exchange rates, and acquisitions and divestitures that occurred in the preceding twelve months, if any. Organic net sales growth (decline) is a useful measure of our performance because it excludes items that are not completely under management’s control, such as the impact of changes in foreign currency exchange rates, and items that do not reflect the underlying growth of the company, such as acquisition and divestiture activity.
Organic net sales growth (decline) provides useful information about our results and the trends of our business. Management uses this measure to monitor and evaluate performance. Also, management uses this measure together with GAAP financial measures in its decision-making processes related to the operations of our reportable segments and our overall company. It is also a significant component in our incentive compensation plans. We believe that investors benefit from having access to the same financial measures that management uses in evaluating operations. The tables presented in “Results of Operations” and “Segment Results” provide reconciliations of organic net sales growth (decline) to net sales growth (decline) calculated in accordance with GAAP.
Organic net sales growth (decline) is a non-GAAP financial measure and should not be considered a replacement for results in accordance with GAAP. This non-GAAP financial measure may not be comparable to similarly-titled measures reported by other companies. The primary limitation of this measure is that it excludes the financial impact of items that would otherwise either increase or decrease our reported results. This limitation is best addressed by using organic net sales growth (decline) in combination with net sales growth (decline) to better understand the amounts, character, and impact of any increase or decrease in reported amounts.
Forward-Looking Information
Certain statements in this Quarterly Report on Form 10-Q are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. These statements are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements include, among others, the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, acquisitions, divestitures, the effects of competition, and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “plan,” “intend,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” “may,” and “should,” or the negative of these terms or similar expressions.
Forward-looking statements involve risks, uncertainties, and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we file this report except as required by law.
The following and other risks, which are described in greater detail in “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023, and in this report, could cause our results to differ materially from those expressed in forward-looking statements:
There may be other risks and uncertainties that we are unable to predict at this time or that we currently do not expect to have a material adverse effect on our business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no significant changes in our exposures to market risk during the first quarter of fiscal 2024. For further discussion of our exposures to market risk, refer to “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934), as of December 29, 2023. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 29, 2023.
Changes in Internal Control Over Financial Reporting
During the quarter ended December 29, 2023, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments in our legal proceedings since we filed our Annual Report on Form 10-K for the fiscal year ended September 29, 2023. Refer to “Part I. Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023 for additional information regarding legal proceedings.
ITEM 1A. RISK FACTORS
There have been no material changes in our risk factors from those disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 29, 2023. The risk factors described in our Annual Report on Form 10-K, in addition to other information in this report, could materially affect our business operations, financial condition, or liquidity. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table presents information about our purchases of our common shares during the quarter ended December 29, 2023:
Maximum
Total Number of
Approximate
Shares Purchased
Dollar Value
as Part of
of Shares that May
Total Number
Average Price
Publicly Announced
Yet Be Purchased
of Shares
Paid Per
Plans or
Under the Plans
Period
Purchased(1)
Share(1)
Programs(2)
or Programs(2)
September 30–October 27, 2023
813,638
121.46
813,400
636,647,983
October 28–December 1, 2023
1,490,417
128.43
1,374,573
460,520,746
December 2–December 29, 2023
1,135,361
137.42
1,051,968
1,815,756,314
3,439,416
129.75
3,239,941
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
In the quarter ended December 29, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a plan for the purchase or sale of our securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement for the purchase or sale of our securities, within the meaning of Item 408 of Regulation S-K, except the following:
The trading plan described above was entered into during an open insider trading window and was in compliance with our insider trading policies and procedures. Actual sale transactions will be disclosed publicly in filings with the SEC in accordance with applicable securities laws, rules, and regulations.
ITEM 6. EXHIBITS
Exhibit Number
Exhibit
10.1
*‡
TE Connectivity Ltd. 2007 Stock and Incentive Plan (amended and restated as of December 12, 2023)
22.1
*
Guaranteed Securities
31.1
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
**
Certification by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
Inline XBRL Instance Document(1)
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File(2)
‡Management contract or compensatory plan or arrangement
*Filed herewith
Furnished herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By:
/s/ Heath A. Mitts
Heath A. MittsExecutive Vice President and Chief FinancialOfficer (Principal Financial Officer)
Date: January 26, 2024